Operations & Expense Benchmark Ratios

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Operating Expense as a Percent of Net Sales

= (Total Operating Expense ÷ Net Sales) x 100
What it is
This figure measures the efficiency of store operations. Level of sales, personnel costs, occupancy costs, and other operating expenses drive this ratio.
Why it matters
An unusually high ratio suggests the examination of all cost centers. Low sales volume can also cause a high result. A very low ratio could indicate that some expenses may be underreported or missing from the calculation. Underreporting expenses will affect not only this benchmark, but also other ratios that include expenses as part of their calculation, such as net profit.
Other ratios or actions to consider
Since most operating expenses are relatively fixed, sales that are lower than projected can elevate the ratio. If this is the case, an analysis of sales trends and forecasting methods might highlight a need to trim the budget or transfer some fixed costs into variable costs.
 
Personnel Expense as a Percent of Net Sales
= (Total Personnel Costs ÷ Total Net Sales) x 100
What it is
Total personnel expense constitutes the most significant of all operating expenses. It is vital that personnel costs are monitored and managed well.
Why it matters
A relatively high ratio may indicate higher-than-necessary staffing levels, staff ineffectiveness, or overly generous salaries and benefits. A low ratio can mean the store will have difficulty filling staff positions or retaining experienced staff.
Other ratios or actions to consider

Consider exploring variations of this measure between stores include the number and mix of different types of staff, staff levels by hour of the day, staff effectiveness, and cross-training among staff.

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